Will Rising Consumer Confidence Spur Demand for Apartments? Let’s Find Out.

Although the U.S. economy has been stable for some time, it was only recently that consumer confidence began to improve, subsequently enhancing the demand for apartments.

There's a correlation between consumer confidence and the demand for apartments. When people are optimistic about the economy, the demand for apartments significantly increases. Conversely, during periods of economic uncertainty, people tend to conserve resources, leading to a decrease in apartment occupancy.

In the third quarter, the U.S. apartment market saw an absorption of just over 90,800 units, as per RealPage Market Analytics data. While this figure falls short of the quarterly demands seen in the years before the COVID-19 pandemic, the positive demand in 2023 marks a significant recovery from the trend of net move-outs observed for much of 2022, a period when consumer confidence was at an all-time low.

The University of Michigan’s Consumer Sentiment Index, a monthly survey tracking American attitudes towards spending and their economic outlook, showed a steady increase from 2011 to 2015, then stabilized from 2016 to 2020, only to plummet with the onset of the COVID-19 pandemic. This event marked the end of the longest period of economic expansion in U.S. history. Following this sharp decline in consumer sentiment, the economy saw a brief resurgence in 2021, helped by vaccine rollouts and federal financial support.

In 2022, consumer sentiment reached near three-decade lows amid soaring inflation rates—the highest in 40 years—and the Federal Reserve's interest rate hikes aimed at controlling inflation. Despite the economy's solid performance, the rising interest rates made consumers feel the pinch.

However, 2023 witnessed a revival in consumer confidence as inflation pressures began to subside and the economic outlook stabilized. Although consumer sentiment hasn't fully recovered to pre-pandemic levels, it is on an upward trajectory. This improvement in consumer outlook has led to increased household formation, further driving the demand for apartments.

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